Police arrest Mahathir cronies

Kasitah Gaddam steps into his car as he leaves court in Kuala Lumpur. Photo: AFP

The arrest of a government minister and a prominent business tycoon on separate corruption charges has sent a powerful signal that Malaysia's new Prime Minister, Abdullah Badawi, is serious about changing the country's free-wheeling business and political culture.

Land and Co-operative Development Minister Kasitah Gaddam was yesterday freed on bail after pleading not guilty to fraud charges involving a multi-million dollar share deal in his home state of Sabah.

Earlier this week Eric Chia, former head of the state-controlled Perwaja Steel, was arrested on charges of criminal breach of trust at the debt-ridden corporation once a centrepiece of Malaysia's economic modernisation.

Both men were promoted by former prime minister Mahathir Mohammad, who retired last October after 22 years as leader.

Mr Abdullah, who is expected to call national elections within the next few weeks - has vowed to clean up corruption and end the tradition of "money politics" on which the ruling United Malays National Organisation built its power base.

Kasitah was charged on two counts involving the sale of shares worth more than $A10 million in a plantation company controlled by the Sabah Land Development Board, which he chairs. Prosecutors allege the minister had pushed through approval of the sale of 16.8 million shares in the company after arranging to take 3.6 million shares for himself.

The shares were linked to a national farming co-operative which Dr Mahathir had planned to have listed on the stock exchange. Mr Abdullah shelved the plan soon after he took over as leader.

The arrest on Monday of Chia was the culmination of an eight-year investigation into one of Malaysia's biggest financial scandals.

Pewaja Steel, one of Dr Mahathir's pet projects, collapsed in the late 1980s. Chia, a Singapore-born tycoon, was brought in to lead a rescue team that failed to stop the corporation running up debts totalling more than $3.3 billion. Chia has pleaded not guilty to charges including allegations he authorised payment of about $27 million by Pewaja to a Japanese consulting firm for work that was never provided.